Arnold: It's Payback Time

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The Republican governor said Wednesday that Washington needs to "put money into the housing market." California has been devastated by the mortgage crisis, with thousands of foreclosures and median home prices falling sharply.

Updated at 8:16 PM PST on Wednesday, Jan 20, 2010

Gov. Arnold Schwarzenegger and Democratic legislators said they're optimistic the federal government will help California bridge a projected $20 billion deficit, but it's far too soon to know how much.

Schwarzenegger, a Republican, has compiled a list of proposals totaling $6.9 billion that he said Washington owes California. Otherwise, he'll recommend cutting or eliminating several programs that provide a safety net for the state's poor and disabled.

Democratic Senator Barbara Boxer told reporters Wednesday that the state's congressional delegation already was working on the majority of the governor's requests, such as more federal funding for Medicaid.

Boxer emphasized that getting extra money for California would be part of a package designed to help all states because many face similar financial woes.

Generally, the federal government picks up half the cost of services provided through Medi-Cal. Schwarzenegger wants the federal government to increase its share to the national average -- 57 percent. Such a change would save the state $1.8 billion annually.

"I told the governor a special carve-out for one state would not get by here because every state wants it," Boxer said. "I did say since most states are concerned about it, that would give us the ability to do some of it. But clearly, we're not going to do something just for one state."

Analysts also said Schwarzenegger will be hard-pressed to get a permanent increase in the federal government's share of Medi-Cal. All states got a temporary increase in their federal match as part of last year's $787 billion bill to improve the economy. Congress is considering passing another bill this year that would extend the temporary boost for several more months.

Boxer also noted that the economic stimulus bill passed last year contains about $50 billion for California. That money will come to the state through a variety of programs over the next year, and officials will try to determine if some of that money could help ease the state's deficit.

Schwarzenegger had little to say after the first few meetings, briefly answering a couple of questions after the meeting with Boxer. At times, he mistakenly referred to her as Senator Feinstein.

"So far, it has been very productive," he said.

California Assembly Speaker Karen Bass, D-Los Angeles, said she disagreed with the governor's "tone" prior to the Washington visit because of his threats to cut or eliminate programs unless the state got more federal funding.

"Today his tone has been a little better," Bass said, adding that the governor did voice his opposition to the health care overhaul during the private meetings with Boxer and Health and Human Services Secretary Kathleen Sebelius.

The governor's office took exception to the speaker's comments.

"If some of our leaders are satisfied with California subsidizing other states while we make devastating cuts to our own programs then they will have to explain that to their constituents" spokesman Aaron McLear said in an e-mail to reporters.

While Schwarzenegger describes California as a donor state, getting 78 cents for every dollar paid in taxes, Boxer cited an analysis from the California Budget Project stating that California got back $1.50 for each dollar paid in taxes during fiscal year 2009. The think tank's estimate includes federal stimulus funds.

Senate President Darrell Steinberg also attended the meetings with Sebelius and some members of the state's congressional delegation. He said that he emphasized how much state lawmakers have already cut from the state's budget.

"The decisions we have already made are heartbreaking and we don't want to have to make more of the same kinds of decisions," Steinberg said.

A federal health official familiar with Schwarzenegger's request said the Obama administration could grant the state more flexibility in determining Medi-Cal benefits and the costs incurred by beneficiaries, but no specific plans have been submitted. Such payments could save the state hundreds of millions of dollars annually.

Meanwhile, Congress would have to approve any increase in the federal government's share of Medicaid spending.